1. Economics of Free and Open Source in Thailand

2. Contents

Studys structure

Chapter 1 : Introduction

Chapter 2 : History & Development and Literature review

3. Studys structure 4. Chapter 1 : Introduction

An important of the study

Objectives

Scope

Source of information

Methodology

Benefits

5. Source:NESDB ( ) 6. Source:NESDB ( ) 7. Source:NESDB ( ) 8. Rising of FOSS worldwide Source: NetCraft http://news.netcraft.com/archives/web_server_survey.html 9. Rising of FOSS worldwide 10. Objectives of the study

To apply economic theory in order to explain :

• • Why FOSS work and exists

• • How can FIRM involve in FOSS

To study and compare a development of FOSS between Thailand and Foreign

To study a direction to develop FOSS industry in Thailand, both Govs policy and Firms strategy

11. Scope

A development of FOSS, with influences people both in government agency, firm and private, during 1999 present.

12. Source of information

Secondary data via publish materials ie. Journal, magazine, newspaper, etc.

A survey and interview.

13. Methodology

Quantitative approach

Qualitative approach

Descriptive approach

• • A comparison between fact from survey and theorem prediction.

14. Benefits

Government : Get a basic idea and knowledge in conducting a policy.

Firm : Get a basic idea and knowledge in order to set its strategy.

Researcher : Get a basic literature, in order to improve a better knowledge.

15. Chapter 2 : History & Development and Literature review

Meaning of FOSS

History and development

Definition

Economics theory to explain FOSS

Literature review

16. Meaning of FOSS

Free software with available source code.

Community is significant.

Success or failure of the software depend on community activeness.

17. History & Development

Birth of Unix era

BSD era

Linus Torvalds and Linux

Open Source era

Community role

Software in different form

Communitys character

18. Communitys character Source :Open Source : Beyond the Fairy tales Richard P. Gabriel Ron Goldman 19. Communitys character

Available of source code

Distribution of owner and control

Scarcity of money, B/W and computer power but not man power

Limited lock-in

Software is not perfect;Tolerable

Open KPI

Professional attention

Elegance code

Ignorance of unskilled users

20. Definition of FOSS

Open Source Initiative : Focus on collaboration and openness

Free Software Foundation : Focus on Freedom

21. Economics Theory

Near zero marginal cost

Network externalities

Critical mass

Public goods & Free-riding

22. Near zero marginal cost Source :Microeconomics : Paul Krugman Robin Wills ,2004 23. Network externalities

More users create more benefits. Consider Fax, Telephone and Mobile.

On software :

• • Pool of experienced users and developer

• • More application available

24. Critical mass Source :Microeconomics : Paul Krugman Robin Wills ,2004 25. Public goods & Free-riding Source:R.van Wendel de Joodeet al.2003 26. Literature review

Explain why hacker produce public goods. R. van Wendel de Joode et al. (2003)

Empirical study. Gosh, Rishab Aiyer et al. (2002)

Balance between community and firm. R. van Wendel de Joode et al. (2003)

Limitation in developing country. Weerawarana, Sanjiva and Weeratunga, Jivaka (2004)

Core Literature. Bessen, James (2004)

27. Why hacker produce public goods

Low contribution cost; internet infrastructure.

Intangible benefits:

• • Direct needs

• • Fun

• • Reputation

28. Empirical study Source: Free/Libre and Open Source Software : A developer survey Rishab Aiyer Goshet al. (2002) 29. Balancing : Firm force

Patents

Hire core developer

Free-riding

Commercialization

30. Balancing : Community force

Law approach : GPL, no prove in court yet.

Non law approach :

• • Beachheads

• • Boycott

• • Competition development

• • Power play

• • Release early, release frequently

31. Limitation on developing country

Problem in IP enforcement

Lack of low cost and efficient internet infrastructure

Low education infrastructure

Freedom to access information

Lack of English language understanding

Lack of high skill developer pool

32. Core Literature : Firm involvement

Open Source Software: Free Provision of Complex Public Goods. Bessen, James (2004).

Based on model of innovations : Agion & Tiroles (1994)

Which based on :

• • Foundation of incomplete contracts ; Hart & Moore (1999)

• • Complexity and renegotiation :A foundation for incomplete contracts ; Segal (1999)

• • A recent development as theory of incomplete contracts , pioneer by Oliver Hart

• • Branch of contract theory and information economics

33. Assumption about software

Software is a complex goods.

• • m features product, use or not use generate 2 mdifferent use-product.

• • Testing, Debugging and maintenance account for 82% of the cost of software.

• • Complexity-related cost also limit the ability of packaged software to meet all consumer needs. Some turn to custom programming or self develop.

Contract issue:

• • To write a contract to cover all features equal write the code itself.

• • Incomplete contract : certain transaction costs prevent some aspects of the future trade from being contracted ex ante (renegotiation in ex post).

34. Self development vs. 1 on 1 contract Customer Developer invest Sell code Customer Self development 35. Pre-package software Developer Sell package Choice 1 : Customer get prepackage Profit of software firm Choice 2 : Customer self develop Firm optimum price Customer Customer Customer Customer Customer 36. Proprietary extension : API Developer Customer Customer Customer API develop Sell Pre package Pre package Pre package 37. Free/Open Source Customer Get source m* feature Develop m*+1 feature and contribute back Pool of FOSS developer and source 38. Conclusion

FOSS is a Prepackages complement, not a direct competition.

FOSS is suitable for skilled customer , which is niche market.

Prepackage will focus to unskilled customer, which is mass market.

Prepackage should decrease price; API wont exist.

FOSS increase social welfare.